7/16. The Senate Commerce
Committee held a hearing on proposed legislation to make permanent
the moratorium on taxes on Internet access. The Senate bills,
S 52 and
S 150,
which are both titled the "Internet Tax Nondiscrimination Act", would
permanently extend the moratorium on internet access taxes and multiple and
discriminatory internet taxes, created by the 1998 Internet Tax Freedom Act (ITFA).
The bills would also eliminate the grandfather provision that allows states
that had taxes in 1998 to continue those taxes.

Sen. John McCain (R-AZ), the Chairman
of the Committee, said in his
opening statement that "It is my hope that we can reach a consensus to
enable the enactment of another extension."

He also argued against joining the issues of taxing internet access to state
collection of sales taxes from remote vendors. He said that "I believe that we
can and should keep the Internet tax moratorium distinct from the simplified
sales tax debate. I do, however, expect to address in a separate hearing later
this year the sales tax issue -- and the Streamlined Sales Tax Project (SSTP)
in particular. The sales tax question is a matter of significant importance
and I look forward to seeing if there is evidence that the States
participating in the SSTP have advanced towards true sales tax
simplification."

Sen. Wyden said that "there should be technological neutrality". That
is, "you should
treat the online world the same way you treat the offline world." He added
that the issue of the internet tax moratorium contained in the ITFA is
distinct from the sales tax issue.

Sen. Conrad Burns (R-MT) said that
"taxing internet access would be a short sighted policy". He commented that
people in his state of Montana rely on e-commerce more than the country as a
whole.

Sen. Frank Lautenberg (D-NJ)
presented the argument in favor of taxation. He said that states are facing a
fiscal crisis. He said that "sales and use taxes generate $150 Million per
year", and that this makes up one third of state and local revenues. He
continued that states will loose tax revenue because of the internet. He
concluded that "government has got to have the revenue."

Joseph Ripp, Vice Chairman of AOL, urged
passage of one of these two bills. He first addressed the problems of
complying with the tax rules of thousands of state and local governmental
entities. He wrote in his
prepared testimony that "Even for a major national provider like AOL, the
prospect of complying with thousands of state and local tax regimes was
daunting. The tax rules varied greatly from jurisdiction, to the extent any
meaningful tax rules had been published at all. Furthermore, many of these
rules based the amount of taxes and the fact of taxation on customer location,
a fact that is often impossible to determine for members using the most
popular dialup access method. While these rules may have had some
applicability to telephone companies, which have years of experience complying
with public utility regulation, they are burdensome and inapplicable to a
company such as AOL."

He also argued that "Passage of S. 150 & S. 52 will promote
digital opportunities
for the 50 percent of Americans who do not currently have Internet access
services. Taxes would only increase their costs and frustrate the national
goal of providing these services for all Americans." He also argued that
passage of one of these bills would promote competition among ISPs, stimulate
the technology sector, and promote competitiveness in digital content and
online software and services.

Paul Misener, VP for Global Public Policy at
Amazon.com, spoke in support of making
the moratorium permanent. He also stated in his
prepared testimony that "the issue of whether and how Congress should
permit states to require out-of-state sellers to collect tax on sales to
in-state consumers is often confused and conflated with the ITFA Moratorium
policy. It is, however, a completely separate matter. And, unlike the policy
choices Congress made to establish, then extend the Moratorium, the remote
sales tax collection issue simultaneously presents Congress with the gravity
of a fundamental constitutional right and the nearly mind-numbing detail of
state sales taxation."

Billy Hamilton, the
Deputy Comptroller at the Texas Comptroller of Public Accounts, testified in
opposition to legislation to extend the moratorium. He argued that the
original ITFA was passed in 1998 to protect a fledging industry. He wrote in
his
prepared testimony that "The ``fledgling industry´´ argument is no longer
relevant. The purchase or supply of Internet access services in the states
that tax services has not been adversely affected and use of the Internet
continues to grow exponentially." He also argued that internet taxation is a
state issue.

He said that it Congress extends the moratorium, it should do so for no more
than two years. He also opposed elimination of the grandfather clause. He also
argued that "The definition of ``Internet access´´ contained in the Act should
be rewritten to insure equity among various types of access providers and
among types of communications services. It should also eliminate opportunities
to bundle otherwise taxable content into a single package of Internet access
in a manner that would prevent states and localities from imposing their taxes
on the otherwise taxable content."

7/16. The
House Judiciary Committee
approved
HR 49, the
"Internet Tax Nondiscrimination Act", by a voice vote.
This bill is sponsored by Rep. Chris Cox
(R-CA), and cosponsored by 132 other members of the House. It would permanently
extend the moratorium on internet access taxes and multiple and
discriminatory internet taxes that was created by the 1998 Internet Tax Freedom Act (ITFA).
It would also eliminate the grandfather provision that allows states that had
taxes in 1998 to continue those taxes.

The Committee also approved an
amendment offered by Rep. Mel Watt
(D-NC) that provides that the moratorium applies to telecommunications
services, "to the extent such services are used to provide Internet access",
thus clarifying that the ban on internet access taxes extends to broadband DSL
and wireless services
provided by phone companies or others.

The original moratorium lasted for three years. In 2001 the Congress
extended the moratorium. It is currently set to expire on November 1, 2003.

Rep. Chris Cannon (R-UT)
advocated passage of the bill. He is the Chairman of the Subcommittee on
Commercial and Administrative Law, which approved the bill on May 22, 2003.
This Subcommittee held a hearing on the bill on April 1, 2003. See, story
titled "House Subcommittee Holds Hearing on Bill to Make Internet Tax
Moratorium Permanent" in
TLJ Daily E-Mail
Alert No. 635, April 2, 2003.

He stated that "this bill does not touch the issue of collecting sales
taxes on remote vendors". When the Congress was considering extending the
moratorium in 2001, some members argued that the two issues should be
addressed together. Rep. Cannon argued that they should be dealt with
separately.

Several members argued that states are facing revenue crises, and that
sales and use taxes need to be addressed by the Congress. For example,
Rep. Bill Delahunt (D-MA) said
that "states are facing the biggest budget crisis since the great depression".
He added that states are losing revenues because of transactions that are
taking place on the internet. He added Congress could remedy this situation by
passing legislation that addresses the Quill decision.

The U.S. Supreme Court ruled in
Quill v.
North Dakota, 504 U.S. 298 (1992) that state and local taxing authorities
are barred under the Commerce Clause from requiring remote sellers without a
substantial nexus to the taxing jurisdiction to collect sales taxes for sales
to persons within the jurisdiction. However, the Court added that Congress may
extend such authority.

Rep. Sheila Lee (D-TX)
fought a solitary battle against the bill. First, she offered an amendment the
would have preserved the grandfather clause. It failed on a voice vote. She
was the only member to vote for it. Then, she offered an amendment to phase
out the grandfather clause over several years. It too failed on a voice vote.
She was the only member to vote in favor.

Technological
Neutrality and New Services. The Committee adopted an amendment
offered by Rep. Watt (at right) that he
stated would provide "technological neutrality".

He explained that the existing moratorium provides a ban on internet access
taxes, but expressly excepts telecommunications services. He stated that some
states currently impose a tax on DSL service when it is sold as part of a
package with phone service. Thus, internet access, when provided by DSL, is
taxed, while other technologies for providing broadband internet access are
not taxed. He stated that his amendment would clarify that DSL service is
covered by the ban on internet access taxes.

The amendment would add the following: "(c) CLARIFICATION. --- The
second sentence of section 1104(5), and the second sentence of section
1101(e)(3)(D), of the Internet Tax Freedom Act (47 U.S.C. 151 note) are each
amended by inserting ``, except to the extent such services are used to provide
Internet access´´ before the period." (Parentheses in original.)

Subsection 1101(e) lists exceptions to the moratorium. Subsection
1101(e)(3) contains definitions. Subsection 1101(e)(3)(D) defines "Internet
access service" as follows: "The term 'Internet access service' means a
service that enables users to access content, information, electronic mail, or
other services offered over the Internet and may also include access to
proprietary content, information, and other services as part of a package of
services offered to consumers. Such term does not include telecommunications
services."

Section 1104 is the general definitions section. Subsection 1104(5) defines
"Internet access" as follows: "The term 'Internet access' means a service that
enables users to access content, information, electronic mail, or other
services offered over the Internet, and may also include access to proprietary
content, information, and other services as part of a package of services
offered to users. Such term does not include telecommunications services."

Rep. Cannon stated that the Watt amendment "restores the Internet Tax Freedom
Act to its original intent". He also argued that allowing taxes on internet
access would aggravate the digital divide.

Rep. Zoe Lofgren (D-CA) also
spoke in support of the amendment. She stated that the rollout of broadband
service is important for stimulating the economy, and that the bill, with the
Watt amendment, will further this goal.

Rep. Steve King (R-IA) raised
the subject of voice over internet protocol (VOIP). He suggested that "if we
prohibit the taxation of voice over IP" then this would put "landline" voice
service providers at a disadvantage.

Steve Berry of the Cellular
Telecommunications and Internet Association (CTIA) stated in a
release
that "This is a big win for the wireless industry -- especially for wireless
technologies that are becoming the pathway to the Internet. The Internet has
changed dramatically in the past five years, and this amendment helps ensure
that the legislation reflects both current and future realities ... Consumers
are best served when Internet access providers are competing on a level
playing field. Technological neutrality is a key factor in making Internet
access available to all Americans."

Reaction. Secretary of Commerce Donald
Evans and Secretary of the Treasury
John Snow
released a joint statement
after the mark up. They wrote that "The Internet is
an innovative force that opens vast potential economic and social benefits of
e-commence and enables such applications as distance learning, telemedicine,
e-business, e-government and precision farming. Government must not slow the
rollout of Internet services by creating administrative barriers or imposing
new access taxes. Nor should government stifle e-commerce through multiple or
discriminatory taxes. Today's Committee vote is welcome news and will help ensure that the full
Congress will have time to pass, and the President to sign, legislation
extending the moratorium before it expires on November 1, 2003."

Rep. Cox, who is the sponsor of the bill,
but not a member of the House Judiciary Committee, issued a
release which
states that "A vote on the House floor and
action in the Senate Commerce Committee are expected soon."

The bill provides an appropriation for the FCC of $279 Million. This is $2
Million below the President's request, and $8 Million above the FY 2003
appropriation.

The HAC also added a rider offered by
Rep. David Obey (D-WI), by a vote of 40-25, that prohibits the use of
funds to grant licenses for a commercial TV broadcast station if the granting
of that license would result in such party having an aggregate national
audience reach exceeding 35%. See, HAC
release.

On June 2, the FCC announced rules changes that raise the national TV
ownership cap from 35% to 45%. That is, one company can own TV stations reaching
no more than a 45% share of U.S. TV households. See, stories titled "FCC
Announces Revisions to Media Ownership Rules" and "Reaction to the FCC's Media
Ownership Announcement" in TLJ
Daily E-Mail Alert No. 672, June 3, 2003, and story titled "FCC Releases
Media Ownership Order and NPRM" in TLJ Daily E-Mail Alert No. 692, July 7, 2003. See also, FCC
press release [10 pages in PDF] of June 2, 2003.

On June 19, 2003, the Senate
Commerce Committee amended and passed
S 1046, the
"Preservation of Localism, Program Diversity, and Competition in Television
Broadcast Service Act of 2003". The bill would roll back some of the
changes FCC's media ownership. In particular, it would establish by statute a
national broadcast television multiple ownership cap of 35%. See,
TLJ story
titled "Senate Commerce Committee Passes Media Ownership Bill", June 19, 2003.

They wrote that "We seek a vote by the Commission on the question of a
temporary stay of our rules to allow the Commission time to obtain concrete
public input on the effect of the rule changes and to allow the people’s elected
representatives in Congress to debate media consolidation. In addition, we seek
expeditious consideration of any reconsideration petitions that are filed with
the Commission once the public has the opportunity to analyze the implications
of the rule changes." See also, Copps and Adelstein
release [PDF].

7/16. The House Judiciary Committee
voted to report
HR 2738,
the "U.S. - Chile Free Trade Agreement Implementation Act", and
HR 2739,
the "U.S. - Singapore Free Trade Agreement Implementation Act".
This Committee has jurisdiction over its visa provisions. The
House Ways and Means Committee,
which has jurisdiction over trade issues, is scheduled to consider these two
bills on Thursday, July 17 at 2:00 PM. The Senate Finance Committee, which has
trade jurisdiction, is scheduled to consider the Senate version of these two
bills on July 17 at 10:00 AM. And finally, the
Senate Judiciary Committee is
scheduled to consider this legislation on July 17 at 9:30 AM. See also, the
U.S Chile Free Trade
Agreement (FTA), which was signed on June 6, 2003, and the
U.S. Singapore FTA,
which was signed on May 6, 2003. Both contains provisions relating to
e-commerce, protection of intellectual property rights, and telecommunications.

7/16. The House Judiciary Committee
approved HR 1303
by voice vote. The Committee adopted an amendment in the nature of a substitute,
and then the bill as amended. This bill amends the E-Government Act of 2002 with
respect to rule-making authority of the Judicial Conference.

Court Rules Retaliation by State for Work
Related E-Mail is Not Actionable Under § 1983

7/16. The U.S.
Court of Appeals (8thCir) issued its unpublished
opinion [2
pages in PDF] in Bracey
v. Lawson,
holding that in a Section 1983 claim that asserts violation of free speech
rights, an alleged retaliation by a state employer against an employee for
sending a e-mail message about the job performance of a co-worker is not
actionable, because the subject of the speech is not a matter of public concern.

Mary Bracey filed a complaint in
U.S. District Court (EDArk)
against Jim Lawson and the City of Little Rock, Arkansas, alleging violation of
42 U.S.C. § 1983.
She alleged that she was denied promotion by her employer for sending an
anonymous e-mail message criticizing a fellow employee's job performance, in
violation of her First Amendment free speech rights. The District Court granted
summary judgment to the City.

Section 1983 provides, in part, that "Every person who, under color of any
statute, ordinance, regulation, custom, or usage, of any State or Territory or
the District of Columbia, subjects, or causes to be subjected, any citizen of
the United States or other person within the jurisdiction thereof to the
deprivation of any rights, privileges, or immunities secured by the Constitution
and laws, shall be liable to the party injured in an action at law, suit in
equity, or other proper proceeding for redress, except that in any action
brought against a judicial officer for an act or omission taken in such
officer's judicial capacity, injunctive relief shall not be granted unless a
declaratory decree was violated or declaratory relief was unavailable."

The Appeals Court affirmed. It wrote that "The First Amendment protects a
public employee's speech so long as it addresses a matter of public concern."

The Court continued that "Speech qualifies as a matter of public concern if
it is ``fairly considered as relating to any matter of political, social, or other
concern to the community.´´ ... Having reviewed the record in the light
most favorable to Bracey, as we must on summary judgment, we conclude that the
district court determined correctly that because Bracey’s e-mail message was
purely job-related and thus did not qualify as a matter of public concern, it
did not constitute protected speech under the First Amendment." (Citations
omitted.)

The Court added that "Bracey failed to show any causal connection between the
e-mail message and any adverse employment action, as is required of a successful
claim of First Amendment retaliation under § 1983."

The Evaluation states that "in-region, interLATA entry by a regional Bell
Operating Company (``BOC´´) should be permitted only when the local markets in a
state have been ``fully and irreversibly´´ opened to competition. Although SBC
has made significant progress in addressing many of the issues raised in the DOJ
Michigan II Evaluation and substantial entry has occurred in Michigan, serious
questions continue to be raised concerning the accuracy of SBC’s wholesale
billing. The record does not permit the Department to conclude that these
concerns are insignificant or that they have been adequately addressed. Thus,
the Department is not in a position to support this application based on the
current record." (Footnotes removed from quotes from the Evaluation.)

The Evaluation also addresses line splitting and DSL service. It states that
"line-splitting service to CLECs could provide an important platform for future
broadband competition. Such a platform will be more important if in the future
incumbent local exchange providers are no longer required to share their voice
customer loops with independent providers of DSL service. In such an
environment, and absent line-splitting service, a given area might be served
only by two broadband providers, the incumbent local exchange provider itself
and any cable television system serving the same area."

The Evaluation recommends that the FCC should "determine based
on the record before it whether SBC's processes provide non-discriminatory
access to line-splitting and UNE-platform services. SBC's current processes
appear to place the CLECs at a competitive disadvantage as against SBC when they
seek to sell DSL service. Their customers could experience a significant
interruption of voice service if they later choose to disconnect the DSL
service. SBC customers apparently do not suffer the same potential disability."

SBC filed its application with the FCC on June 19, 2003. The FCC must approve
or deny the application within 90 days. This is SBC's fourth application to
provide long distance service in Michigan. It withdrew the previous three. This
is FCC WC Docket No. 03-138. See also, DOJ
release.

Thursday, July 17

The House will meet at 10:00 AM for legislative business. It will consider
several non tech related items. See,
Republican Whip Notice.

9:00 AM. The Republican House Policy
Committee's Tax Reform Subcommittee will hold a closed meeting on
international taxation reform. There will be a press stakeout at 10:00 AM
at the Hall of Columns, 1st Floor, Capitol Building. Press contact:
Kate Whitman at 202 225-5611.

9:30 AM. The Senate Judiciary
Committee will hold an executive business meeting. The agenda includes
consideration of several judicial nominees: William Pryor (U.S. Court
of Appeals for the 11th Circuit), James Browning (District of New Mexico),
Kathleen Cardone (Western District of Texas), James Cohn (Southern District of
Florida), Frank Montalvo (Western District of Texas), and Xavier Rodriguez
(Western District of Texas). The agenda also includes consideration of several
executive branch nominations: Jack Goldsmith (Assistant Attorney
General in charge of the Office of Legal Counsel), Christopher Wray
(Assistant Attorney General in charge of the Criminal Division), and Michael
Garcia (Assistant Secretary, Department of Homeland Security). The agenda also
includes consideration of several bills and resolutions, including legislation
implementing the U.S. Singapore Free Trade Agreement and the U.S. Chile Free
Trade Agreement; the Committee has jurisdiction over the visa provisions. See,
notice.
Press contact: Margarita Tapia at 202 224-5225. This Committee frequently
changes the time and agenda of its meetings without notice. Location: Room 226, Dirksen
Building.

10:00 AM. The Senate Finance
Committee will meet in executive session to consider the United
States-Chile Free Trade Agreement Implementation Act, and the United
States-Singapore Free Trade Agreement Implementation Act. This session will
take place during the Committee's hearing on nursing home quality, as soon as
a quorum is present. Location: Room 215, Dirksen Building.

1:00 PM. The House Judiciary
Committee's Subcommittee on Courts, the Internet, and Intellectual
Property will hold a hearing on
HR 2517,
the "Piracy Deterrence and Education Act of 2003." The hearing will be
webcast. Press contact: Jeff Lungren or
Terry Shawn at 202 225-2492. Location: Room 2141, Rayburn Building.

RESCHEDULED TO JULY 22.9:30 AM.
The Senate Judiciary
Committee will hold a hearing on several pending judicial nominations:
Steven Colloton (U.S. Court of Appeals for the Eighth Circuit), Henry Floyd
(District of South Carolina), Brent McKnight (Western District of North
Carolina), David Proctor (Northern District of Alabama). The hearing will also
include the nomination of Rene Acosta to be an Assistant Attorney General in
charge of the Civil Rights Division. Press contact: Margarita Tapia at 202
224-5225. Location: Room 226, Dirksen Building.

3:00 PM. The House Commerce
Committee's Subcommittee on Telecommunications and the Internet will hold
a hearing titled "The Regulatory Status of Broadband Services: Information
Services, Common Carriage, or Something in Between?" The hearing will be
webcast. Press contact: Ken Johnson or Jon Tripp at 202 225-5735. Location:
Room 2123, Rayburn Building.

Deadline to submit comments to the Federal
Communications Commission (FCC) in response to its Notice of Inquiry (NOI)
pertaining to the possibility of incorporating receiver performance specifications
into the FCC's spectrum policy. This NOI follows the recommendations of the FCC's
Spectrum Policy Task Force (SPTF)
report [PDF] of November 15, 2002. See,
story titled
"FCC Announces NOI Re Receiver Performance Standards" in TLJ Daily E-Mail Alert
No. 624, March 17, 2003. See also,
notice in the Federal Register, May 5, 2003, Vol. 68, No. 86, at Pages 23677 -
23686. This is ET Docket No. 03-65, FCC 03-54. For more information, contact
Hugh Van Tuyl at the FCC's Office of Engineering and Technology (OET) at 202 418-7506 or
hvantuyl@fcc.gov.

Deadline to submit comments to the U.S. Patent
and Trademark Office (USPTO) in response to its
notice in the Federal Register requesting public comments regarding changes
needed to implement a Patent Cooperation Treaty (PCT) style Unity of Invention
standard in the U.S. See, Federal Register, May 20, 2003, Vol. 68, No. 97, at
Pages 27536 - 27539. For more information, contact Robert Clarke at 703 305-9177 or
robert.clarke@uspto.gov.

Deadline to submit comments to the Federal
Communications Commission (FCC) in response to its notice of proposed
rulemaking, released on April 30, 2003, regarding changes to its rules
implementing the FCCs policy to carry forward unused funds from the schools
and libraries universal support mechanism (aka e-rate subsidies) in subsequent
funding years. See,
notice in the Federal Register, June 20, 2003, Vol. 68, No. 119, at Pages
36961 - 36967.

10:00 AM. The Senate Judiciary
Committee will hold a hearing on several pending judicial nominations:
Steven Colloton (U.S. Court of Appeals for the Eighth Circuit), Henry Floyd
(District of South Carolina), Brent McKnight (Western District of North
Carolina), David Proctor (Northern District of Alabama). The hearing may also
include the nomination of Rene Acosta to be an Assistant Attorney General in
charge of the Civil Rights
Division. Press contact: Margarita Tapia at 202
224-5225. This Committee frequently changes the time and agenda of its
meetings without notice. Location: Room 226, Dirksen Building.

3:00 PM. The National
Telecommunications and Information Administration (NTIA) will hold a
public briefing on its creation of a second level domain within the .us
country code domain that is restricted to material that is not harmful to
minors. This is required by the Dot Kids Implementation and Efficiency Act of 2002,
HR 3833
in the 107th Congress, Public Law No. 107-317. This
briefing will provide information about the domain, instructions about
registering a kids.us address, content guidelines and restrictions, and an
overview of the content review process. See,
NTIA
notice. Location: Room 2123, Rayburn Building.

Wednesday, July 23

9:00 AM. Day one of a two day meeting to the
Bureau of Industry and Security's
(Bureau of Export Administration) Information Systems Technical Advisory
Committee. Part of the meeting will be closed to the public. The agenda
includes discussion of export controls on signal generators and arbitrary
waveform generators, discussion of developments in micro-processors technology
and export controls, discussion of proposal on encryption in network
management, election of a new chairman, and secret matters. See,
notice in the Federal Register, July 8, 2003, Vol. 68, No. 130, at Pages
40626 - 40627. Location: Room 3884, Hoover Building, 14th St. between
Pennsylvania Ave. and Constitution Ave., NW.

2:00 PM. The Senate Judiciary
Committee will hold a hearing on the nominations of Rene Acosta to
be an Assistant Attorney General in charge of the
Civil Rights Division,
and Daniel Bryant to be an Assistant Attorney General in charge of the
Office of Legal Policy. Press contact:
Margarita Tapia at 202 224-5225. This Committee frequently changes the time
and agenda of its meetings without notice. Location: Room 226, Dirksen Building.

7/15.
Erkki Liikanen, the Member of the
European Commission
responsible for Enterprise and the Information Society, gave a
speech titled "Getting Ready to Implement New EU Electronic Communications
Law" in Brussels, Belgium.

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